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Globalization and Distributing Income Upwards

It’s sometimes interesting to see how words are twisted around in deceitful attempts by the corrupt and powerful. There are also useful reminders about prescription drugs and the medical-industrial complex in this post, though Dean Baker should use terminology different than the “free market” in describing this more. In my view, it would often be better to simply reiterate the point of eliminating drug patent monopolies. Really, the “free market” has never existed and will never exist. The phrase denotes a mechanism to draw certain conclusions, and too many people have already fallen for ideological fundamentalism based on it.

The theme of Edsall’s piece is that in the United States, as in other wealthy countries, the main political divide is between those who support and those who oppose globalization:

“…if we define globalization as receptivity to open borders, the expansion of local and nationalistic perspectives and support for a less rigid social order and for liberal cultural, immigration and trade policies.”

The elites in the United States who claim support of globalization actually do not favor open borders and liberal trade policies, although they dishonestly claim this position. The “globalizers” strongly support protectionist measures that benefit people like them.

First and foremost, they favor longer and stronger patent and copyright protection. These forms of protection (sorry folks, they are still protectionism even if you like them) are enormously costly. They often raise the price of the protected items by hundreds or even thousands of times the free market price.

This is why prescription drugs are expensive. New cancer drugs, which often sell for hundreds of thousands of dollars for a year’s treatment, would typically sell for a few hundred dollars in the absence of patent and related protections. The United States will spend more than $440 billion this year on prescription drugs. These drugs would likely cost less than $80 billion in a free market. The difference of $360 billion is roughly 1.9 percent of GDP. If we add in the cost of protectionism in medical equipment, software, and other areas it would likely be more than twice as much.

In addition, while trade policy has been deliberately designed to put manufacturing workers in direct competition with low-paid workers throughout the developing world, which puts downward pressure on the wages of less-educated workers more generally (this is the theory, not an accidental outcome), it has largely left in place the protectionist barriers which benefit doctors, dentists and other highly paid professionals. (Foreign-trained doctors cannot practice in the United States unless they complete a U.S. residency program. Dentists must graduate from a U.S. [or Canadian] dental school. As a result, these professionals get paid roughly twice as much as their counterparts in other wealthy countries.)